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Israeli firms in post-Ba'athist
Baghdad
By Iason Athanasiadis
With much of the rest of the commercial world
shut out of the reconstruction of Iraq, Israeli
companies are quietly finding a way through US-imposed
roadblocks that favor selected companies and countries
in order to ink contracts.
Having already
exported their expertise to Egypt and Jordan while
pioneering models of agricultural technology used in
Egypt to combat desertification, Israeli firms are
trying to find ways of entering a potentially lucrative
market, neglected after over a decade of sanctions and
ripe for expansion by an entrepreneurial private sector
willing to invest in dates, vegetables, wheat, poultry
products, cattle and sheep.
Iraq, however, is
unstable, and Israel's popularity is at an all-time low
in the region. So it seems convoys of Israeli
businessmen are unlikely to begin pouring into Iraq
anytime soon. However, Israeli businessmen have learned
through long and sometimes bitter experience in the
Middle East that joining up with the Australians,
Americans or British is one way of doing business in
Iraq.
Another is partnering with Jordanian and
Turkish Muslim firms that possess prior experience doing
business in Iraq. Israeli entrepreneurs are treading
more carefully after learning in Egypt and Jordan that
advertising their presence in a hostile environment
usually leads to business disasters and squandered
capital.
Despite isolated cases where Israel's
retail sector has sought to make inroads into Iraq - the
food company Osem is reported by the Yediot Aharonot
newspaper to have received a request to market its Bamba
(peanut-flavored puffs) snack there - Israel is more
likely to covertly promote its hi-tech products. Iraq’s
Coalition Provisional Authority has already awarded a
contract worth US$4-5 million to Iridium Israel for
mobile satellite communication services.
"In
general, Israeli products are high-value and not suited
to the consumer in the street," says Doron Peskin, the
managing director of Info-Prod, a business information
company that provides its clients with market research
and political risk analysis. "Israeli technologies are
used in niche markets but there will be no influx in the
retail market."
In fact, the Sharon government
is approaching Iraq's lucrative market - with an
estimated $250 million per annum export potential for
Israel - through a two-pronged approach, which involves
capitalizing on Israel's agricultural and communications
technology expertise while trying to tap into Iraq's
natural resources with ambitious infrastructure
projects.
"There are two main sectors in which
Israel can succeed," Peskin says. "The first is the
hi-tech industry relevant to reconstruction. The second
is agricultural technology including advanced water
purification techniques."
So far, five Israeli
companies reportedly have expressed interest in working
in Iraq: infrastructure firms A Arenson and the Solel
Boneh Building and Infrastructure Company; Shiryonit
Hosem, a manufacturer of steel doors; Tami 4, a water
purification company that is already exporting
purification devices to the new market; and Tanurgas, a
Tiberius-based firm.
"From time to time,
representatives of Israeli firms who speak openly to the
Hebrew-language press of their intentions or even
already businesses [in Iraq], consider these statements
mere 'public relations' attempts," says Peskin. "Serious
Israeli firms, which target the Iraqi market, are
operating through 'silent' channels."
One of the
more tantalizing prospects is Iraq's agriculture sector.
Farming took a back seat in the 1950s when the
government focused its investments in the oil sector and
the country lost self-sufficiency. Still, the field
remains Israel's second revenue source after energy.
Iraq's water resources and the lush Euphrates valley,
known for its fertile soil, are tempting Israel's
agricultural specialists.
A former Australian
ambassador to Tel Aviv recounts how Israeli businesses
are flocking to his embassy "because we are reputed to
have the upper hand in Iraq's ministry of agriculture".
He adds that "Australian firms would never use Israeli
partners because of the controversy factor and because
we bring our own expertise."
"We believe that
success for Israeli products will be achieved through
working with a third party, including changing source of
origin and labelling," says Peskin. "This can be done
from holding companies in Cyprus and Jordan, for
example, will reduce the psychological barrier of
importers being seen to trade with Israel, and have the
result of hiding such trade from the common Iraqi."
Ariel M Ezrahi, a London-based lawyer who wrote
his dissertation on trade relations between Israel and
its Arab neighbors, agrees: "Let the Jordanians have the
office in Baghdad, manned by Arabs, and let Israelis
feed in goods to Amman. Have them repackaged there so no
Hebrew markings are apparent, and move them on to Iraq.
That way, the average Iraqi consumer will not realize
that what appears to be a Jordanian product is
Israeli-supplied. Maybe 20 years down the line, it won't
be a problem, but even in Jordan at the moment, you
don't find openly Israeli products."
Partnerships are far from being a total
solution. Many companies may steer clear of
collaborating with Israeli firms because of popular
anger with Israel's policies. Campaigns to "name and
shame" Arab companies trading with Israeli firms are
common in the Arab world, notably in Jordan. There, the
Jordan Professional Unions, a stronghold of opposition
against the normalization of ties with Israel, issued a
list of Jordanian personalities and firms dealing with
Israel. The Internet has also proved a powerful tool for
mobilizing opposition, particularly in countries with
authoritarian governments, where public protest is
violently quelled.
Even if Muslim companies
disregard domestic opposition and team up with Israeli
firms, problems remain. The Jordanian and Turkish
governments are unpopular in Iraq due to Jordan's trade
with the Saddam regime and Turkish incursions into
northern Iraq. Both countries' embassies were recently
bombed. Disclosure that Arab companies are colluding
with Israel in a market still technically boycotting
Israel would lead to hostile popular and mixed
governmental reactions by other Arab governments.
"We have already seen Syria raise the issue of
reconstruction in Iraq and request discussion in the
Arab League," says Peskin. "On the other hand, Jordanian
entrepreneurs are already exploiting opportunities with
Israel. The answer lies somewhere between these two
extreme cases. There is no homogeneous Arab perspective.
Individual businessmen will always try to develop
opportunities, but officially, no Arab nation can be
seen to encourage Israel to enter the market openly."
With an increasing number of contracts being
awarded to Arab and European firms with prior experience
trading in Iraq, it could well be that, despite being a
virgin market, Iraq may also prove to be a difficult
arena in which to turn a profit, especially given the
added costs Israeli companies will incur in seeking to
keep a low profile.
"It has to be remembered
that the Iraqi market is competitive and many foreign
nations are vying to exploit this market," says Peskin.
"Although Israel has special advantages in specific
industries, overall, the political sensitivity that
trade with Israel arouses will mean that at this stage,
at least, Israeli trade will have little impact."
The profits that Israel's entrepreneurs might
produce in Iraq are minimal compared to the benefits
that will be forthcoming should Israel's government
succeed in realizing a couple of major infrastructure
projects, notably the disused Mosul-Haifa pipeline.
Israeli Infrastructure Minister Joseph Paritzky has been
pursuing the idea of reopening the pipeline.
In
the wake of repeated sabotage attacks against the
northern pipeline exporting oil via Turkey, the Israeli
proposal has seemed increasingly possible. Both
impoverished Jordan - whose territory the pipeline would
transit - and oil-starved Israel are bound to welcome
the idea. Israeli sources have described the Jordanian
government as "optimistic" at the prospect. The US will
also welcome the diversion: a land route for oil direct
to the Mediterranean would lessen American dependence on
Gulf oil supplies.
Another large-scale project
recently floated by Israel was the revival of a railway
track linking the northern Jordanian town of Irbid with
the Israeli seaside city of Haifa, originally developed
as part of the 1994 Israeli-Jordanian peace treaty.
Extending the track to Baghdad would diminish Iraq's
isolation and allow for the transport of heavy goods
cheaply and efficiently, directly from a major
Mediterranean port.
However, all experts
interviewed for this article stressed that it is still
too premature for Israeli businesses to be making
speculative plans for trading in Iraq.
"This is
a transitional regime and Israelis feel relatively
comfortable at the moment," warns Ezrahi. "But if there’s
a transfer of power, things could change very quickly. A
case in point is Iran, where enormous Israeli deals were
made because the Shah was pro-American. As a result, a
lot of Israelis visited Tehran on a regular basis. After
the Islamic Revolution everything stopped abruptly. We
should never forget that Iraq is still unstable."
(Copyright 2003 Asia Times Online Co, Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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